The general equilibrium effects of a productivity increase on the economy and gender in South Africa

Abstract:

This study utilises a computable general equilibrium (CGE) model to examine the effects of
economy-wide (SIM 1) and partial (SIM 2) productivity increases on the economy, gender
employment, wages, income and welfare in South Africa. The model has 49 sectors, 14
household categories, and 2 primary inputs. SIM 1 results in ‘output’ led employment
demand and increased earnings for all skill types of men and women. Skilled men benefits
more than others in most sectors. Under SIM 2, productivity has negative employment impact
of all skills mostly in labour-intensive sectors. Some displaced labour relocates to expanded
export-orientation and service sectors resulting in increased economy-wide jobs and
earnings. Unskilled women earnings, however, decline because they are concentrated in lowpaying
positions. In addition, productivity improves household’s welfare due to reduced
commodity prices and improved earnings.